The Hidden Challenges of Modernizing Tolling Back Office Systems (and How to Get it Right)

In the world of tolling, efficiency is paramount and back office systems are the unsung heroes, processing countless transactions and shaping customer experiences. Yet, as tolling authorities push to modernize these critical systems, they face a common challenge: the need for extensive customization.

Our work with industry leaders – including the North Texas Tollway Authority (NTTA) – has revealed a crucial insight: While the core functionality of back office systems remains consistent, each authority brings a unique fingerprint of business rules, legacy systems, and third-party integrations to the table. This diversity creates a complex tapestry that can impact project complexity, timelines, and budgets significantly.

In this blog, you will:

• Uncover the unexpected obstacles in back office modernization, including the need for extensive customization.
• Learn proven strategies for successful implementations, such as aligning solutions with business needs, reducing customization through standardization and modularization, and choosing flexible, future-proof architectures.
• Discover how to strike the perfect balance between necessary customization and operational efficiency, ensuring a smooth transition to a modern, optimized back office system.

Read on to unlock the path to seamless implementations and streamlined workflows, positioning your tolling authority for long-term success in the ever-evolving landscape of transportation technology.

The customization conundrum: A major obstacle to success

Your back office system is the heart of your tolling authority operations. It’s responsible for handling essential functions such as transaction processing, account management, billing, revenue collection, reconciliation, and reporting. While these core functions are similar across authorities, the specific ways in which you perform them can vary significantly. That’s driven by your unique business rules and operational requirements, often dictated by legislative differences. As you know, these variations present ongoing challenges for you and your tolling vendors, necessitating highly customizable solutions that can adapt to your specific needs without compromising on functionality or efficiency.

The intricacies of toll rate calculation

As a tolling authority, you know that customization is paramount when it comes to toll rate calculations. Tolling authorities employ a wide range of rate structures, from simple fixed rates to complex, multi-tier models based on vehicle class, time of day, and geographic zones. Some authorities even venture into the realm of dynamic pricing, adjusting toll rates in real time based on traffic conditions. To accommodate these diverse rate calculation methodologies, you need systems that are highly customizable and can ensure accurate rate application and revenue capture.

Navigating the shift to Open Road Tolling

The transition from traditional cash collection at booths to cashless Open Road Tolling (ORT) systems presents another set of challenges for your tolling authority. ORT systems use advanced technologies like electronic transponders and license plate recognition to allow vehicles to pass through tolling points without stopping. If your authority is embracing cashless ORT, your back office system must be equipped to handle the intricacies of electronic transactions, account management, and customer notifications. Conversely, authorities who still rely on traditional cash collection face the daunting task of reconciling both electronic and cash payments, adding layers of complexity to back office operations.

Untangling the web of invoicing rules

Invoicing rules further illustrate the intricacies of back office implementations. Some authorities opt for a granular approach, generating multiple invoices per transaction based on specific business rules. While this level of detail may be necessary, it can overwhelm customers with paperwork or notifications. Others streamline the process by consolidating transactions into monthly statements, simplifying the customer experience. The qualification rules for invoicing also vary widely, with some authorities invoicing after a certain threshold of unpaid tolls, while others invoice after every toll crossing. Adding to the complexity, DMV interfaces differ from state to state, each with its own unique set of license plate lookup rules and patterns.

The art of account management

Account management is another area where authorities differ in their strategies. Some use a unified approach, keeping all transactions in one account, whether registered or not. This allows negative balances in registered accounts, which are later billed or collected. While simplifying management, this method requires handling ongoing transactions regardless of account status. Others separate non-registered accounts for unpaid tolls. When a registered account becomes delinquent, they perform a DMV lookup to identify the owner and create a new non-registered account for billing. This method involves managing multiple accounts per customer, highlighting the need for customizable systems that can adapt to varied practices.

The examples above offer a glimpse into the intricacies of back office system implementation. Numerous other factors contribute to the customization needs that you must carefully consider to successfully deploy an effective solution.

The double-edged sword of software customization

While tailoring solutions to meet the unique needs of your tolling authority is essential, be mindful that too much customization can give way to delays, skyrocketing costs, and technological limitations. Here’s why:

• Time-to-market delays. Crafting a bespoke solution requires a significant investment in design, development, testing, and deployment phases. Each customization adds another layer of complexity, stretching project timelines and pushing back the delivery of a fully operational back office system.
• Increased costs. Customizations often result in higher upfront costs due to the need for additional development resources, testing cycles, and ongoing support to maintain custom features. Long-term operational and maintenance (O&M) costs can also rise as bespoke solutions require specialized support and troubleshooting.
• Risk of technology lock-in. Heavily customized back office systems can make it prohibitively expensive for tolling authorities to switch to newer, more cost-effective, or scalable technologies when needed. Technology lock-in prevents them from adapting to changing market conditions and taking advantage of emerging opportunities. When core functionalities are hard-coded or deeply embedded into a specific layer of the system, transitioning to a more modern technology stack can require substantial financial investment and extended project timelines. Vendors may also miss out on market opportunities due to the inability to adapt quickly, potentially leading to missed revenue and competitive disadvantages.
  
  

Mastering the path to back office modernization

So how do you avoid these pitfalls while balancing the need for some customization? When modernizing your back office systems, selecting the right vendor is a critical decision that can make or break the success of your project. To aid in this process to ensure a smooth transition and a sustainable solution, consider the following key factors:

Aligning with business rules and operational needs

Seek technology solutions that closely align with your unique operational needs. While some customization may be unavoidable, minimizing it is crucial. Opt for configurable systems that allow business rules to be adjusted through settings rather than hard-coded customizations. However, be cautious of assuming that a vendor's success with one tolling authority guarantees a perfect fit for your specific needs. Each tolling authority has its own business requirements, transaction volumes, operational nuances, and regulatory landscape, so what works for one may not seamlessly translate to another.

Reducing risk through standardization and modularization

Minimize the risks of customization by advocating for standardization and modularization in your back office system. By implementing a modular system, you can replace or upgrade individual components without disrupting the entire ecosystem, reducing long-term costs and increasing flexibility. For instance, by decoupling payment gateways, reporting tools, and other key modules, you can future-proof your system and adapt to evolving technologies and requirements.

Positioning yourself for future flexibility

Choose a back office system built on a modern, flexible architecture that supports your evolving business needs and is technology agnostic. Avoid solutions that are tightly coupled to a single technology stack, as this can limit adaptability and scalability in the long run. Instead, embrace systems that can seamlessly integrate with a variety of technologies and platforms, allowing you to leverage the best tools for your specific requirements. Consider these three components when selecting your solutions:

• Microservices architecture. This approach breaks down applications into smaller, independent services that can be developed, deployed, and scaled individually. This approach enhances agility, facilitates easier updates, and seamlessly integrates with new technologies. According to a 2023 Gartner® report, “As a result of using microservices architecture, respondents who were able to identify improvements (n = 145) pointed to better deployment speed and/or cadence (63%), agility (56%) and application scalability (51%) at their organizations.”*
• Micro-Application Programming Interfaces (APIs). Micro-APIs enable authorities to create lightweight, modular interfaces that facilitate seamless communication between different software components. This modularity enhances flexibility, allowing for quick adjustments to meet changing operational requirements and integrate with third-party services.
• Cloud-native platforms. Cloud-native platforms provide the scalability and resilience necessary for modern tolling operations. They enable rapid deployment and automatic scaling in response to demand fluctuations, reducing downtime and operational risks. According to a 2024 Forbes report, cloud-native development significantly reduces the time an organization needs to focus on non-core business requirements, such as enabling faster processing of routine tasks. It also allows for cost-effective experimentation with new applications compared to on-premises solutions.
  
  

Mitigating risks through gap evaluation

Before committing to a vendor, thoroughly evaluate its current product to identify any system gaps relative to your specific needs. This involves assessing:

• The vendor’s ability to configure the system to meet operational rules without excessive customization.
• The complexity of addressing these gaps, including interface development, data migration, and regulatory compliance adjustments. By proactively identifying potential hurdles, you can make informed decisions and plan for a smoother implementation process.
  
  

Obtaining the evidence

Prioritize back office solutions with a proven track record of successful implementations. Look for systems that are currently live and operational, especially those that have been in use for an extended period. Stability and real-world validation are key performance indicators that the system will function as expected in a high-volume tolling environment. Don’t be swayed by promises alone; ask for evidence of a vendor’s ability to deliver reliable and scalable solutions. Learn more about thishere.Considering Total Cost of Ownership (TCO)

Consider both the upfront implementation costs and the TCO, including ongoing operational and maintenance expenses. Vendors should provide detailed information on the running costs of their similar operational systems, including hardware, licensing, and support fees.

Leveraging a software-as-a-service model

If your authority does not have the appetite for the risk of implementing a large-scale back office system, consider leveraging an existing back office system from another tolling authority as a Software-as-a-Service (SaaS) model. In this arrangement, you can outsource transaction processing and customer service functions to a proven system already operational in the region. This approach significantly reduces initial costs, complexity, and implementation time, while still delivering a robust, scalable solution. You will avoid many of the risks and expenses associated with custom back office implementations and costly infrastructure investments by utilizing a trusted system as a service.

Your next steps

If you’re ready to confidently navigate the barriers to back office systems modernization to position your business for the future, you’re well on your way now. Collaborating with a specialized partner provides vital expertise, helping you to mitigate risks, avoid costly mistakes, and enhance the success of your system modernization efforts. Here are a few key areas where a partner can help you get started:

• Avoid costly upgrades through strategic system evaluation and gap analysis. A critical first step is to examine your current back office system and compare it to your future needs. By identifying gaps in functionality and technology, you can make informed decisions about necessary upgrades or changes, avoiding costly mistakes down the line. This proactive approach ensures seamless transitions that keep pace with your evolving business goals.
• Ensure quality and build stakeholder confidence through Independent Verification and Validation (IV&V). An independent and unbiased review of your system’s effectiveness is crucial. IV&V helps you identify potential risks and issues early in the implementation process, enabling you to address concerns before they escalate. This proactive approach not only safeguards system quality but instills confidence in stakeholders. Beyond identifying risks, IV&V helps drive operational excellence by aligning system implementations with industry best practices and performance benchmarks, ensuring that new systems meet your current and future goals.
• Deliver on time and on budget with Strategic Portfolio Management (SPM). Effective portfolio and project management is the glue that holds everything together. A skilled partner ensures that all aspects of your implementation are carefully planned and executed, aligning resources, timelines, and budgets to achieve the desired outcomes. This structured approach minimizes disruptions and helps you stay on track, delivering projects that meet strategic objectives.
• Reduce implementation risk with expert procurement and vendor selection. Selecting the right vendor is a make-or-break decision. A partner can help you evaluate those whose offerings align with your goals and technical requirements, significantly reducing the risks associated with system integration. Strong vendor partnerships lead to smoother implementations and stronger results.
• Optimize your operations with industry leading best practices. A partner with deep industry knowledge can help you apply best practices to streamline your workflows, boost operational efficiency, and enhance service delivery and customer satisfaction. The rightprocesses help ensure that your modernized systems are optimized for your unique needs.

*Gartner One-Minute Insights, Microservices Architecture: Have Engineering Organizations Found Success? (For Gartner Subscribers only), Jun 18 - Jul 13, 2023
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